European funds boost euro zone bond holdings to 2-year high-poll
LONDON Oct 31 (Reuters) - European fund managers increased their exposure to euro zone bonds to a two-year high this month, boosted by record-low euro zone interest rates and market speculation about further monetary easing, a Reuters survey showed on Thursday.
Holdings in euro zone bonds increased to 62.4 percent, a level not seen since September 2011. Fund managers also showed a preference for UK bonds, increasing their exposure to a one-year high of 5.1 percent.
The European Central Bank has held interest rates at a record low of 0.5 percent since May this year.
The monthly asset allocation poll of 19 asset managers in Europe, excluding Britain, also showed investors increased overall equity allocations in their global balanced portfolios to 47.9 percent in October, the highest since January.
Holdings in high-yield bonds increased to 18.9 percent, marking a high since the data on bond allocation started being collected in Feb. 2010.
Boris Willems, strategist at UBS Global Asset Management, said the fund manager had been "selectively adding U.S. government, high yield and/or corporate bonds prior to the Fed announcement," referring to the Federal Reserve's decision on Wednesday to keep stimulus in place for a while longer.
The poll was conducted Oct. 16-29, after the resolution of the U.S. debt ceiling impasse but before the outcome of the Fed meeting.
Investors cut their U.S. bond holdings to 19.9 percent, their lowest since May 2012. But they retreated from the UK and euro zone equity markets and moved back into U.S. stocks.
Fund managers cited a premature tapering of U.S. stimulus and rising money market rates in the euro zone as among the greatest risks to their global portfolio strategy, pointing to concerns about a fragile economic recovery.
"The main downside risk is that fiscal austerity extends to the U.S. while remaining in place in most of Europe and in Japan," said Monica Defend, head of global asset allocation research at Pioneer Global Asset Management.
"As a result, fiscal policy is set to get tighter across the developed world, which has driven global growth and replaced slowing emerging economies over the last 2 years."
Investors cut their exposure to both stocks and bonds in emerging Asia, with bond allocations falling to their lowest since July 2011.
(Editing by Stephen Nisbet)